Standard & Poor’s Global Ratings has affirmed its ‘BB-/B’ long- and short-term foreign and local currency sovereign credit ratings on Armenia. The outlook on the long-term ratings is stable.
The stable outlook reflects the balance between Armenia’s strong economic growth prospects and moderate general government debt levels, against existing vulnerabilities in the balance of payments, and heightened geopolitical risks.
“Armenia is navigating a challenging economic and political landscape. Key issues include persistent tensions with Azerbaijan, particularly concerning border delimitation and the proposed transit corridor, and potential constitutional amendments in Armenia. The country is reassessing its security alliances, particularly with Russia, and is exploring deeper ties with the West, including reevaluating military alliances to adapt to shifting regional dynamics. Moreover, increased spending on refugees, infrastructure, and health care is exacerbating fiscal pressures. Despite these challenges, Armenia’s economic outlook remains robust, supported by an increase in productive capacity driven by substantial capital and labor inflows into the information and communication technologies (ICT) sector,” Standard & Poor’s said.
According to the agency, the ratings on Armenia are constrained by several factors, including the country’s weak yet gradually improving institutional framework, moderate per capita income levels, as well as balance of payments and fiscal vulnerabilities. Additionally, Armenia’s exposure to geopolitical risks further constrain the ratings.
The ratings are supported by Armenia’s strong economic growth outlook, moderate government debt, access to external official funding, and a prudent policy framework, which has maintained economic and financial stability despite multiple external shocks.
Standard & Poor’s anticipates the economy to decelerate in 2024 compared with the high average real growth rate of 10.7% observed during 2022-2023.
Real GDP growth is expected to decelerate to 6.2% in 2024, down from 8.7% in 2023, due to weaker external demand and a reduction in migrant and financial inflows.
Standard & Poor’s still expects Armenia’s economy to expand by 6.2% this year, due to strong consumption driven by a robust tourism sector, real wage growth, and higher government spending.
